An Empirical Investigation of the Linkages between Government Payments and Farmland Leasing Arrangements
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This article investigates the impacts of decoupled and coupled support
payments on farmland rental contract choices using a principal-agent model. We consider
cash and share contracts as well as hybrid contracts, which are increasingly prominent in
US agriculture. The conceptual framework suggests that restrictions on sharing payments
between contracting parties are ineffective and induce an offsetting contractual
rearrangement. Empirical results from a multinomial logit model confirm that
government support programs have large significant effects on contract choices and that
these effects vary by types of subsidies.